Report :: ATTENTION SHOPPERS: You Pay the Health Insurance Bills For Some of New Jersey's Largest Employers by Mary E. Forsberg

One reason so many people like to shop at big-box retailers like Wal-Mart and Home Depot is low prices. What consumers might not realize, however, is that they often are paying twice: once at the cash register and again when they pay taxes. That's because some of the largest, most profitable retailers in the state also have the largest numbers of employees and their families covered by a state-run health insurance program for low-income New Jerseyans that has a price tag approaching $400 million in state and federal funds this year.

An analysis of NJ FamilyCare enrollment data shows that a state program that might be expected to meet the needs of self-employed workers and those whose employers are too small to afford health coverage is also very widely used by the families of large employers. Six of New Jersey's 10 largest employers have no one in FamilyCare. The four that do are: Wal-Mart/Sam's Club, Wakefern Food Corp/ShopRite, The Great Atlantic & Pacific Tea Co., Inc. (A&P), and Home Depot. Wal-Mart/Sam's Club, the eighth largest employer in New Jersey, has more employees and employees' family members in the state health program than any other employer.

While employees of individual retail and supermarket chains, and their families, are among the largest users of the state health program for low-income working people it is ironic that the sector with the most participants overall is health care. More than 10,000 of the children enrolled in FamilyCare have a parent who works in that field.

This report provides information never before released on who uses FamilyCare, a program that will cost state taxpayers more than $175 million this year. The twin issues of who is served by the program and how much it costs require policy analysis and decision making by the state at a level beyond what has taken place so far.

In the 1990s, federal legislation was adopted to allow states to establish programs to make sure that the children of low-paid working people have health insurance. The premise was simple: children with access to preventive care and other health services get a better start and live healthier lives; uninsured children are at greater risk of suffering delays in development that can affect their educational achievements and wellbeing in later life.

NJ KidCare started enrolling children in 1998. Three years later it was renamed NJ FamilyCare and opened to parents as well as their children. Though FamilyCare receives federal, in addition to state, funding it is not part of Medicaid-which exists to make sure the poorest people get health care. Known as State Children's Health Insurance Programs (SCHIPs), FamilyCare and its counterparts around the nation are targeted to help working people whose incomes are above what would qualify them for Medicaid but below what they would need to be able to afford health insurance on their own-which could cost over $7,000 a year for just one employee.

Eligibility for FamilyCare is based on a formula that allows participation until a family's income reaches three and a half times the federal poverty level. Children are entitled to insurance as long as family income is no more than $56,315 for a family of three, $79,135 for five and $101,955 for seven.

How much a FamilyCare participant pays for coverage depends on income and family size. For example, there is no fee to cover a child in a family of three with income not exceeding $24,135. A family with an income of $32,181 would be charged a $17.50 per month premium plus co-payments for some services. At $56,315, the premium tops out at $117 a month. For a family of seven, coverage would be free up to $43,695 in income; the highest premium is $117 a month. Under federal law, total premiums and cost-sharing cannot exceed five percent of a family's income. Income eligibility cutoffs are lower for parents and caretakers of dependent children and lower still for adults with no children.

According to the Department of Human Services there were 100,856 children and 57,797 adults in FamilyCare as of May 2005. More than 180,000 adults were enrolled in the program at its peak in Fiscal Year 2002, according to state budget data, far exceeding expectations and available funds. In response to state budget shortfalls, enrollment for adults without dependent children was closed in September 2001. In June 2002 enrollment was closed for parents as well.

The cost of FamilyCare has grown from about $3 million to an estimated $380 million-plus in Fiscal Year 2006, which began July 1, 2005. The program is supported by state and federal funds that vary in proportion, depending on whether insurance coverage is for children, parents, or adults with no children. Overall, the state has provided about 44 percent of the funds, the federal government about 53 percent and enrollees the rest through premiums and co-pays.

In July 2005, Acting Gov. Richard Codey signed a measure to expand FamilyCare that he said would nearly double the number of parents and children to about 100,000 parents and 200,000 children in three and a half years. The state estimates that the expansion will cost New Jersey $6 million this year. The state expects the remainder of the costs will be funded by a "windfall" of federal aid.¹

During legislative debate, the Office of Legislative Services (OLS) estimated that the cost to the state for this expansion would be between $4.8 million and $6.8 million for every 10,000 additional children enrolled; $12 million for every 10,000 additional parents; and $23.5 million for every 10,000 additional childless adults-depending on the state/federal match. OLS estimated that the state spends approximately $113 a month for each enrolled child, $200 a month per parent and $390 for adults with no dependent children.

State funding for FamilyCare is part of the Health Care Subsidy Fund (HCSF), which also pays for charity care subsidies and hospital relief. The expectation was that money for these programs would come from a combination of sources: employer and employee payroll taxes that were to have been temporarily diverted from the Unemployment Compensation Fund, appropriations from the state's General Fund and revenue from cigarette and tobacco taxes. In Fiscal Year 2002 the state used funds from its settlement with tobacco companies over health claims to expand the program. Tobacco Settlement Funds provided $100 million to the FamilyCare program in that year and $149 million the next year.

At its peak in 2002, FamilyCare had almost 275,000 children and adults enrolled and cost $553 million, of which $302.9 million came from state funds, $246.9 million from the federal government and $3.2 million from enrollees. By Fiscal Year 2003, support for these programs was supposed to come entirely from just two sources: the General Fund and cigarette and tobacco taxes. Meanwhile, money is still being diverted from unemployment taxes to pay for FamilyCare and other HCSF programs.

Since its inception, the HCSF has provided more than $8.8 billion to pay subsidies to hospitals and support FamilyCare. In addition to the employee and employer payroll taxes paid directly into the HCSF based on current law, it includes $1.2 billion in funds from the existing Unemployment Compensation Fund diverted during the annual state budget process.

More than one million New Jerseyans-about 12 percent of the state's population-are without health insurance, according to a report issued in August 2004 by the New Jersey Department of Human Services and the Rutgers Center for State Health Policy. More than 200,000-or 20 percent-of the uninsured are children. Almost 70 percent of uninsured children in New Jersey live at or below the federal poverty threshold of $19,350 for a family of four and over a third of all uninsured adults had incomes below 200 percent of poverty-$38,700 for the same family of four. Perhaps more startling is the fact that 400,000 of uninsured, non-elderly adults-almost half-work full time.²

For the past 60 years it has been the pattern in the United States that most people obtain health insurance through their employer. Efforts to establish a government-run system like that in most industrialized nations were defeated in the late 1940s and again in the early 1990s. Today the two main sources of health insurance coverage in the US are employer-sponsored coverage and Medicaid.

Over 60 percent of Americans are insured through employer-sponsored programs. Large firms-particularly those with a significant number of high-wage workers-have the lowest costs for providing health insurance because they can take advantage of economies of scale. Their workers are the most likely to be offered insurance, face the lowest health insurance prices and have on average the broadest coverage.

Smaller firms, on the other hand, must make difficult decisions and face higher costs because they are less able to spread their risk. Employees of small businesses are the least likely to be offered insurance and, if they are offered health insurance, they have the largest co-payments and the largest deductibles. In some instances they have longer waits before they can qualify for the company-sponsored insurance.

Throughout the 1990s until 2001, the proportion of working people covered by employer-sponsored health insurance grew modestly from 65 percent to 67 percent. From that peak it fell to 63 percent in 2003. Access declined most for low-income people-from 63 percent to 55 percent between 2001 and 2003. One reason for this decline is that there actually were fewer full-time workers in the labor force. More importantly, however, the cost of providing health insurance rose by about 28 percent during the period, making employers less likely to offer it.³ According to the Kaiser Family Foundation, premiums for employer-sponsored health insurance went up by 11.2% in 2004 alone, the fourth consecutive year of rising rates.

The New Jersey Business and Industry Association in March 2005 reported that its annual survey of employers found small companies dropping coverage and that, among those who responded, the percentage providing health coverage was down for the first time since the survey began 12 years ago.

As health insurance costs rise, employers have been looking for ways to contain them. Some have chosen to drop coverage for children or sharply increase the amount that employees have to pay for it. One result of this is that an erosion of employer-based coverage for children began in the 1990's and continues today.

In 2003, 71 percent of white employees had employer-sponsored coverage compared to 51 percent of blacks and 40 percent of Latinos. Between 2001 and 2003, coverage for young adults between 19 and 39 declined from 65 percent to 59 percent and coverage for children under age 18 mirrored that drop. Coverage for families with income less than 200 percent of the federal poverty level ($38,700 for a family of four in 2005) declined from 37 percent to 33 percent.⁴

In the past, the decline of employer-sponsored insurance has meant an increase in the number of people without insurance. But this has not been the case in recent years-the uninsured rate has been constant at about 15 percent of Americans. The reason is the expansion of public health insurance programs, including Medicaid and SCHIPs, from 8 percent in 1997 to 12 percent in 2003.⁵ Low-income children experienced the largest gains in public insurance enrollment between 2001 and 2003, growing to 49 percent from 38 percent as a share of all participants. Nationwide, about five million children are in SCHIPs.⁶

This large increase in public insurance coverage has been fueled by parents either losing employer coverage or choosing to substitute more affordable public coverage. Clearly, the ability of states to provide a safety net is a good thing. But it raises a serious public policy question: are employers-including some of the largest and most profitable-turning over to taxpayers the cost of providing heath insurance to workers and their families? Put another way, are state programs serving as a subsidy to large companies that choose not to face reduced profits or lower dividends to shareholders because someone else is willing to pick up the tab for health coverage?

One way to answer that question would be for the State of New Jersey to monitor trends to see whether the share of FamilyCare enrollees from large companies is increasing. But the state does not do this. New Jersey Policy Perspective requested under the Open Public Records Act a list of how many employees and family members in the program came from which employers. The response was that the state did not keep track of such information. It could be obtained only if NJPP would pay to program state computers to search the database that included each participant's application to FamilyCare.

Several weeks and almost $2,000 later, NJPP is able to present data based on FamilyCare enrollment as of April 11, 2005. The file provided by the Department of Human Services included 52,936 line items adding up to 94,119 children and 18,313 adults. On each was an employer identified with the number of adults employed and their children. If an employer had 100 families in FamilyCare, that employer was listed 100 times; the state maintains no cumulative data.

Though the applications for FamilyCare ask for proof of income and whether each child being enrolled has health insurance and from what source, the Department stated that applicants for FamilyCare do not have to list an employer when applying for the program. So, if anything, this report understates the extent to which employees and employee family members from particular employers are in FamilyCare. The data were further complicated by numerous spellings (Walmart, Wall Mart, Wal-Mart) of what were obviously the same employer and by the various names the same company could have (Wendy's Restaurants versus Briad Group, which operates 50 Wendy's in New Jersey). Many applicants appeared to be self-employed and listed their employer as babysitter, homemaker, housewife, etc. For the purpose of categorizing data, such applicants are attributed only to a sector of employment and not to a particular employer in this report.

In order to make an assessment of coverage, we classified the FamilyCare enrollment data into 31 job sectors. They appear below, along with some of the employment areas that comprise them.

As mentioned earlier, health care and retail are the sectors found most in FamilyCare, combining for more than 30 percent of total enrollees. The table below lists the sectors with the largest number of employees and dependents enrolled in FamilyCare.

More than 10,000 of the children enrolled in FamilyCare have a parent who works in some area of health care-a hospital, nursing home, rehab facility or for a temporary medical staffing agency-including almost 450 children of workers at a doctors or dentists offices. More than 7,500 enrolled children have a parent who works in retail. Over 5,100 children have a parent who works at a restaurant, food services company, a pizza or donut shop or a diner. Almost 4,200 children have a parent who works at a supermarket, convenience store, bakery or liquor store. And almost 3,500 children have a parent who cleans houses for a living or works at a dry cleaner, a beauty parlor or an auto repair center. Just over 3,200 children have a parent who works for an office temp or security firm or a delivery service. And just over 3,100 children have a parent who works for a local board of education or a municipality.

Of the 10 employers whose workers and their families rely most on FamilyCare, four are categorized as retail, three as grocery, two as health care and one as a food service provider. The table below lists all employers who had at least 100 enrollees in FamilyCare.

The City of Newark and the Newark Board of Education, combined, accounted for 41 adults and 154 children, for a total of 195 FamilyCare enrollees. YMCAs across the state were listed as the employers for 244 FamilyCare enrollees: 40 adults and 204 children. Law offices accounted for 23 adults and 122 children, for a total of 145.

Supermarkets employ 67,530 people in New Jersey and pay more than $1.5 billion a year in salaries and wages.⁷ Pathmark, Shop Rite and A&P rank third, seventh and tenth in the number of employees and children on state subsidized health care.

These findings for New Jersey are consistent with work that has been done in other states. At least eight-Arizona, California, Connecticut, Georgia, Massachusetts, North Carolina, Tennessee and Wisconsin-have evaluated their own programs. In some other states, non-governmental organizations have conducted analyses similar to what appears here for New Jersey.

According to a report by the Washington-based group Good Jobs First, in 16 states it has been determined that Wal-Mart-which had record profits of $10 billion last year-was at or near the top in terms of the number of employees and employees' family members participating in state health insurance programs. Wal-Mart does offer health insurance, but there have been many documented allegations that the company requires a long waiting period to qualify (six months for full-time and two years for part-time workers) and that it charges too much (with premiums that start at $155 per month for families, coupled with a $1,000 deductible) for workers to afford on Wal-Mart wages.⁸

The data in this report are an important first step, but there is a need for the state to go much further. For one thing, more must be known about why people-especially if they are in families where someone works for a large, profitable employer-are in FamilyCare. Some clues are provided in the results of a survey performed earlier this year by the Executive Office of Health and Human Services in Massachusetts. It found that reasons given for someone not being covered by an employer who actually offers insurance included: high cost to employees; not being eligible because of part-time status; and being newly employed and not yet eligible because of the length of time on the job set by the employer as a qualification for coverage.

With funding and fairness as important issues-and as the state budget faces growing pressures and federal funding is uncertain in the wake of continuing income tax cuts-New Jersey needs to take more interest in who is using FamilyCare. The goal should not be to push out lower-income people who are acting in their own clear financial interest. They should not have to choose between health insurance and other necessities. Rather, the state should take steps to make sure that employers-especially the largest and most profitable-are contributing their fair share and not simply shifting their obligations onto the taxpaying public.

The state should closely monitor FamilyCare enrollment and require information from employers about what coverage they offer and the terms.

As part of this process, New Jersey should compile and make public a yearly report listing the names of employers whose employees and family members are in FamilyCare; how many adults and children are in the program from each employer; the terms and insurance coverage these employers offer; and the reasons why FamilyCare participants do not participate in employer-sponsored coverage if it is offered.

Massachusetts could serve as a good model for such reporting, with a measure that became law last year over the veto of Gov. Mitt Romney. On February 1, 2005, the state released Employers Who Have 50 or More Employees Using Public Health Assistance. The report includes for each employer: name and address; number of public health beneficiaries who are employees; number who are spouses or dependents; whether the employer offers health benefits to its employees; and the cost to taxpayers of providing public health benefits to these employees and their dependents.

A similar measure has been introduced at the federal level by US Sens. Edward M. Kennedy of Massachusetts and Jon Corzine of New Jersey and in the House by Rep. Anthony Weiner of New York.

But disclosure is only part of the answer. It is also important to relieve taxpayers of the cost of paying for health coverage that employers can afford and should provide.

If an employer has more than two percent of its workforce and employees' dependents -or at least 50 participants-in FamilyCare, it should pay toward the state's cost of providing health coverage.

Such a requirement would not only ease the burden on taxpayers but also make it so that companies that do cover their employees at reasonable prices and reasonable terms are no longer at a competitive disadvantage.

Legislation sponsored by Assembly members Louis Greenwald, Linda Greenstein and Jeff Van Drew would require retailers with 10,000 or more employees to make an hourly prorated expenditure of $2.45 on health coverage or pay the state Health Care Subsidy Fund the difference between what they do offer and that figure. This legislation does not go far enough. Whether an employer has 100 employees or 10,000 should not matter, nor should the type of work being done. Some very profitable small and medium-sized employers might be among those preferring to have taxpayers provide for their employees.

As Prof. Michael B. Katz of the University of Pennsylvania aptly put it, "In no other modern industrial nation is health care an earned privilege rather than a human right."¹⁶ But as long as the system relies on employers as the chief providers of health coverage, then allowing-and perhaps even encouraging-some of the biggest, most profitable employers to opt out at taxpayer expense is not sustainable. What takes place today in New Jersey is an expensive tradeoff that is largely unrecognized by the public and has not been calculated by the state.

It is in the taxpayers' interest for the state to learn the extent to which growth in FamilyCare stems from employers using the program as a way out of their own obligations-and to make sure all employers pay their fair share. Health insurance is too important-and costs too much-for New Jersey to operate in the dark. What's needed is public policy that strikes a better balance between the needs of employees and taxpayers, and the obligations of employers.

Livio, Susan K. "Trenton expands health care plan for parents, kids." The Star Ledger. July 14, 2005.
-----. "The Medically Uninsured in New Jersey: A Chartbook." New Jersey Department of Human Services and Rutgers Center for State Health Policy. August 2004.
Shrunk, Bradley C. and James D. Reschovsky. "Trends in U.S. Health Insurance Coverage, 2001-2003." The Center for Studying Health System Change. Tracking Report No. 9. August 2004.
Ibid.
Ibid.
Ibid.
Angelo, Robert. "Economic Impact of New Jersey's Supermarket Industry." Rutgers - The State University. Department of Labor Studies and Employment Relations. October 2004.
Worden, Amy. "Pa. to Wal-Mart: Pay up for health care." Philadelphia Inquirer. May 16, 2005.
Dube, Arindrajit and Ken Jacobs. "Hidden Cost of Wal-Mart Jobs: Use of Safety Net Programs by Wal-Mart Workers in California." University of California at Berkeley Labor Center. August 2, 2004.
Cohen, Robin K. "Husky A and B-Enrollment and Employer Data." Connecticut Office of Legislative Research. January 10, 2005.
Miller, Andy. "Wal-Mart stands out on rolls of PeachCare: Sign-up ration far exceeds other firms." The Atlanta Journal-Constitution. February 27, 2004.
-----. "Employers Who Have 50 or More Employees Using Public Health Assistance." A report by the Executive Office of Health and Human Services, Division of Health Care Finance and Policy. February 1, 2005.
Abelson, Reed. "States Are Battling Against Wal-Mart Over Health Care." New York Times. November 1, 2004.
AFL-CIO. The Wal-Mart Tax: A Review of Studies Examining Employers' Health Care Cost-Shifting, March 31, 2005.
"Wal-Mart Workers Need State Health Aid." The Capital Times, November 4, 2004.
Katz, Michael B. "The Price of Citizenship: Redefining the Welfare State." New York: Owl Books, 2001.

New Jersey Policy Perspective is a nonpartisan, nonprofit organization established in 1997 to conduct research and analysis on state issues. Our goal is a state where everyone can achieve to his or her full potential in an economy that offers a widely shared, rising standard of living.